The Energy Election: Trump Provides More Clues on Energy Priorities in North Dakota Speech

Takeaway:Energy policy will play a prominent role in the 2016 presidential election.

Energy promises to play a big role in the 2016 presidential election and will provide sharp contrasts between the candidates on energy policies. The November election will be a key catalyst on several issues of interest to investors. This is the first in a series of client notes on The Energy Election.

As with most issues, Donald Trump has not provided much if any details on his energy policies to date. There is no energy plan on his campaign web site so we have been left with some campaign trail rhetoric with some snippets in press interviews and tweets.

Today we got a little more visibility on Trump’s energy policies during the candidate’s speech to the annual Williston Petroleum Conference in North Dakota. It was an important venue and the home state of Trump energy advisor - Congressman Kevin Cramer.

While the speech was still lacking details, it likely provided some reassurance to those in the oil, natural gas and coal sectors.

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05/27/16 11:35 AM EDT

HOLX: Adding Hologic to Investing Ideas (Short Side)

Takeaway:We are adding Hologic to Investing Ideas today.

Editor's Note: Please note that Healthcare analyst Tom Tobin will send out a full report outlining our high-conviction short thesis next week. In the meantime, below is a brief summary of our thesis sent today by Hedgeye CEO Keith McCullough in Real-Time Alerts.

Healthcare stocks have been some of the worst performers in the US stock market in 2016. This should surprise no one who shares our #LateCycle view. Some sub-sectors of the Healthcare economy are as late cycle as late cycle gets.

A Healthcare stock we used to like (when the cycle was a tailwind) is Hologic (HOLX). Now, with #TheCycle as a headwind, Tom Tobin likes it on the short side. In his latest Institutional Subscriber note he pointed out the following:

"We have made no change in s-curve which forecasts declines in late 2016 and into 2017. We listened to the BofA presentation by CEO Steve MacMillan yesterday. We were interested to hear more commentary regarding deceleration in 2017, which sounded incremental and consistent with our view. Additionally, while we expect gross margins to turn lower as a result of declines in 3D product revenue, we were interested in MacMillan's comment that there remains opportunity to drive gross margins higher from here, which we don't expect to happen given lower mix of 3D system sales. One point of disagreement may also be a misunderstanding the use of the word "peak" when speaking about 3D adoption. We would definitely disagree that the peak will occur in 2017 as MacMillan stated yesterday. Our data and view suggests we will see the peak in June 2016."

Buying at cycle peaks can be disastrous,

KM

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05/27/16 11:10 AM EDT

Steiner: ‘China Is An Enormous Systemic Risk’

In this brief excerpt from The Macro Show earlier today, Hedgeye Financials analyst Josh Steiner discusses why the “unbelievable rate of credit growth” in China is now slowing and why it could pose risks for investors long the stock market.

Today's 1Q16 GDP estimate was revised up to 0.8% versus the first estimate of 0.5%.

That's misleading.

In calculating economic growth, the government used the sub-1% GDP Deflator, which stands at 0.6%. Meanwhile, if the US Government used the Federal Reserve's prefered measure of inflation, core PCE which now reads 2.1%, US GDP would have beenNEGATIVEin Q1.

Look at the difference between the two inflation measures in the table below:

In related news, this marks the 5th straight quarter where Hedgeye's Predictive Tracking Algorithm has been within 20-30bps of nailing GDP. That's more than we can say for the Fed and Old Wall Consensus which have an average quarterly intra-quarter tracking error of between 152 to 246 basis points.

#AccuracyWins

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